Loan-to-Value Ratio (LTVR)

 What is it?

LTVR compares the loan amount to the property’s value to measure lender risk.

Formula:

$$\text{LTVR} = \left(\frac{\text{Loan Amount}}{\text{Home Value}}\right) \times 100$$

Example:

• Home price: $100,000

• Down payment: $10,000

• Loan amount: $90,000

$$LTVR = \left(\frac{90,000}{100,000}\right) \times 100 = 90\%$$

A higher LTVR means higher risk for the lender.

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Loan Origination Fees

What are they?
Fees charged by lenders for processing a new loan, typically between 0.5% and 3% of the loan amount.

Calculation:

$$\text{Origination Fee} = \text{Loan Amount} \times \text{Origination Percentage}$$

Example:

• Loan amount: $225,000

• Origination fee rate: 2%

$$225,000 \times 0.02 = 4,500$$

Kelly and Bob will pay $4,500 in origination fees at closing.

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Important Notes

• Lenders use the lower of appraised value or sales price to calculate LTVR.

• Good news — origination fees aren’t set in stone. You may be able to negotiate them, so it’s worth asking your lender upfront.